1984 (4) TMI 278 - HC - VAT and Sales Tax

Summary

Issues:
1. Challenge to exaction of penal interest under section 23(3) of the Kerala General Sales Tax Act, 1963.
2. Validity of provisions of section 23(3) before and after the amendment.
3. Claim of penal interest for non-payment of amounts under provisional assessments after final assessments are made.
4. Authority to issue orders permitting payment in instalments.
5. Application of promissory estoppel in tax matters.
6. Discretion of the State in enforcing penal interest.
7. Arbitrary imposition of penal interest.
8. Relief from penal interest in specific cases based on compliance with Government orders or agreements.
9. Relief under amended sub-sections (4) to (6) of section 23.

Analysis:
1. The judgment addresses challenges to the exaction of penal interest under section 23(3) of the Kerala General Sales Tax Act, 1963. The Court notes contentions regarding the validity of the provisions of section 23(3) both before and after the amendment, emphasizing that liability for penal interest automatically attaches to tax demands upon default in payment, regardless of the correctness of the assessment or disputes. The Court highlights the historical context of the provisions and previous challenges based on constitutional grounds.

2. The Court examines specific cases where penal interest was challenged, considering instances where final assessments were made after provisional assessments and the implications for claiming penal interest. The judgment delves into the authority to issue orders permitting payment in instalments, citing a case where the Government's order for instalment payments was questioned. The Court analyzes the application of promissory estoppel in tax matters, emphasizing the evolving interpretation of constitutional principles like article 14 in such cases.

3. The judgment scrutinizes the discretion of the State in enforcing penal interest, particularly in cases where Government orders or agreements allowed for deferred payments. The Court condemns arbitrary imposition of penal interest and asserts that even statutory obligations must adhere to constitutional standards, including article 14. Specific relief from penal interest is granted in cases where compliance with Government orders or agreements is demonstrated, highlighting the importance of honoring agreements made by the authorities.

4. The judgment provides relief from penal interest in various specific cases based on the facts presented, such as compliance with Government orders, interim directions, or agreements. The Court emphasizes the need for authorities to act reasonably and avoid arbitrary imposition of penal interest, especially when taxpayers have acted in good faith or in accordance with official directives. The judgment concludes by dismissing certain petitions where relief under amended sub-sections of section 23 is available, and where nominal delays in payment do not warrant interference.